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Jayanta Mallick

Kolkata, Jan. 8 Noble, which blew the whistle on accounting malpractices to its investor clients, feels vindicated in the light of Satyam episode, Mr Surabh Mukherjea, Indian head of equities, told Business Line.

Noble – the new Anglo-Indian investment bank, which advises a third of active FIIs in India, that blew the whistle first on corporate governance, accounting malpractices and promoters’ manipulative tricks in India – has now decided to be forthright in articulating absence of promoters’ trustworthiness in their future reports.

Noble had come out with two reports detailing manipulative practices by a fifth of listed stocks and accounting malpractices in one out of two BSE 500 components since September 2008. Mr Mukherjea said that the Satyam fraud would prove to be a watershed event.

“A new set of regulations should catalyse a better corporate governance regime. The role and responsibility of statutory auditors and independent directors are crucial. Currently, the regulators are toothless tigers against the politically well-connected, manipulative promoters,” said Mr Mukherjea.

Noble had found out that in many cases, statutory auditors were in conflict of interest as they provided consultancy and advisory services to the companies whose book they audited.

“Our study did not find even a single case where an independent director took a stand. It’s a strange conspiracy of silence against other stakeholders,” he said.

Maytas Infrastructure ranked sixth on Noble’s list, with a record of “creative accounting” practices.

“We had warned our clients. Two-thirds of our clients did not buy into our recommendations. We were dubbed alarmist by some, who are now making frantic calls seeking recommendations on Indian equities in view of Satyam fraud coming to the fore,” said Mr Mukherjea.

In the last four months, Noble had been getting threatening calls or e-mails from companies that figured on their blacklist.

“We normally revealed to all companies where we detected accounting manipulation or promoters’ misdemeanour. Interestingly, a large number of them did not deny the wrong doings, but threatened action against us,” he said.

“Some of the officials of the errant companies even bragged how they tricked the regulator and the Government.”

In view of such opposition, Noble had taken legal guards against any corporate backlash. “Earlier, we had clearly pointed out the mismatches in profits and cash flows, but stopped short of pinpointing the perpetrator of the frauds. Now, investor activism would allow us to be bold enough to mark out the promoters, wherever indications (of rregularities) are there,” he added.

More Stories on : Investor Protection | Corporate Governance | Satyam Computer Services Ltd

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